Chow Tai Fook Profit Almost Doubles on Higher Gold Demand

Gold jewelry sits on display as pedestrians are reflected in the window of a Chow Tai Fook Jewellery Group Ltd. store in the shopping district of Tsim Sha Tsui in Hong Kong. Photographer: Jerome Favre/Bloomberg

Nov. 27 (Bloomberg) -- Chow Tai Fook Jewellery Group Ltd.,
the world’s largest listed jewelry chain, forecast “steady”
growth for the rest of the fiscal year after first-half profit
almost doubled on a surge in Chinese demand for gold.

Net income rose to HK$3.5 billion ($451.5 million) from
HK$1.82 billion a year earlier for the six months ended Sept.
30, the company said in a stock-exchange statement yesterday.
That was above the average estimate of HK$2.98 billion from five
analysts compiled by Bloomberg.

Retail sales of gold in China jumped between April and June
as global bullion prices plunged, aiding Chow Tai Fook and
smaller competitors such as Luk Fook Holdings International Ltd.
The Chinese economy is showing signs of resilience and demand
for jewelry continues to be strong, the company said in its
statement, citing government data.

“We are still holding an optimistic attitude towards the
market,” said Hamilton Cheng, finance director of Chow Tai
Fook, adding that it is too early to give a precise forecast for
the rest of the year.

The stock climbed 4.1 percent to HK$12.80 as of 9:36 a.m.
local time. The benchmark Hang Seng Index lost 0.07 percent.

Sales jumped 49 percent during the six-month period to
HK$38 billion and rose 33 percent at stores open for at least a
year. The company said it opened 118 new points of sale, which
includes standalone stores and concessionaire counters, taking
the total to 1,954 as of the end of September. Bullion for
immediate delivery has dropped about 25 percent in Singapore
this year.

Second Half

China’s gross domestic product growth rebounded to 7.8
percent in the third quarter from a year earlier after a pace of
7.5 percent in the previous three months.

Luk Fook earlier this month also said it expects first-half
net income to increase “significantly” on higher sales of gold
products and gem-set jewelry.

Chow Tai Fook’s second-half sales growth may be “softer”
and same-store sales growth could slow to mid-to-low single
digits, Catherine Lim, an analyst at Citigroup Global Markets
Inc., wrote in a report last month. Gold price movements could
also swing the company’s margin outlook, she wrote.

“The gold rush now is not comparable with that in April,
May and June,” Kent Wong, managing director of Chow Tai Fook,
told reporters in Hong Kong. “It’s reasonable to see sales
slowed but this is within our expectation. Gem sales have
improved as customer confidence recovered.”